Household Consumption Expenditure Survey

Indian Economy glossary

Also called: HCES · Topic: Economic Data: Census, NSS, Surveys and Statistical Tools · NCERT: Beyond NCERT

Meaning

The Household Consumption Expenditure Survey (HCES) is a sample survey run by the National Statistics Office (NSO) under MoSPI. It records how much Indian households spend on food, other goods and services, and durable goods. From this it works out each person's average monthly spending.

  • Formula: MPCE (monthly per capita consumption expenditure) = household's monthly consumption expenditure ÷ number of members in the household.
  • Why it matters:
  • It is the main source for poverty estimates and for measuring consumption inequality (the Gini coefficient).
  • Its spending patterns set the weights of the Consumer Price Index (CPI).
  • It is used to cross-check the consumption figure in national accounts.

Explanation

How the survey works

  • It is a sample survey, not a census. The NSS uses stratified multi-stage sampling:
  • First, it picks census villages (rural) and Urban Frame Survey (UFS) blocks (urban).

  • Then it picks households inside them.

  • History:

  • Consumer expenditure surveys began with the NSS 1st round (1950-51).
  • Large "thick" rounds came every five years, from the 27th round (1972-73) to the 68th round (2011-12).

  • The 75th round (2017-18) was withheld in November 2019. The official reason was "data quality". A leak had shown real MPCE falling.

  • HCES 2022-23 (August 2022 to July 2023) and HCES 2023-24 (August 2023 to July 2024):

  • Three questionnaires: (1) food; (2) consumables and services; (3) durable goods.
  • Three monthly visits to each household, one questionnaire per visit.
  • CAPI (Computer Assisted Personal Interviewing): the enumerator types answers straight into a tablet. Built-in checks catch errors as the data are entered.

  • Two MPCE figures: one with and one without the value of free items received from the government, such as PDS grain, laptops and bicycles.

  • Results by fractile class: MPCE is reported for population groups ranked by spending, from the bottom 5% to the top 5%. These groups are percentiles (cut-off points that split a ranked population into 100 equal parts).

Reference periods: why recall changes the answer

A reference period (recall period) is how far back the household is asked to remember its spending.

Method Recall used
Uniform Reference Period (URP) 30 days for all items
Mixed Reference Period (MRP) 365 days for clothing, bedding, footwear, durables, education and institutional medical care; 30 days for everything else
Modified Mixed Reference Period (MMRP) (from 2009-10) 7 days for perishables (edible oil, egg-fish-meat, vegetables, fruits, spices, beverages, processed food, pan/tobacco); 365 days for the MRP items; 30 days for the rest
  • Shorter recall → people forget less → more spending is recorded.
  • So measured MPCE is highest under MMRP, then MRP, then URP: MMRP > MRP > URP.
  • Higher MPCE means measured poverty is lower under MMRP.
  • This is a non-sampling error (an error from design or recording, not from sample size). A bigger sample does not remove it.

Worked example: MPCE and the urban-rural gap

  • A household's MPCE: a family of 5 spends Rs 20,000 a month.

  • MPCE = 20,000 ÷ 5 = Rs 4,000.

  • Urban-rural gap, 2023-24:

  • Urban MPCE Rs 6,996 ÷ rural MPCE Rs 4,122 = 1.70.

  • So urban people spend about 70% more than rural people.

  • Same gap in earlier years:

  • 2022-23: Rs 6,459 ÷ Rs 3,773 = 1.71, a gap of 71%.
  • 2011-12: the gap was 84%.

What can push the numbers up or down

  • Shorter recall periods raise recorded spending.
  • Counting free PDS grain as consumption raises measured spending, even if the family's cash income has not changed.
  • Under-reporting by the rich lowers the top end. Rich households refuse to answer or report less. As a result:
  • Survey consumption falls short of national-accounts PFCE (Private Final Consumption Expenditure). This is the NSS-NAS gap.

  • Measured inequality looks lower than it really is.

  • Old sampling frames: the lists that samples are drawn from are based on Census 2011. New settlements can be missed.

In India

  • Who runs it: the NSO under MoSPI. The NSO was formed in May 2019 by merging the CSO (set up in 1951) and the NSSO. The NSS itself began in 1950 on P.C. Mahalanobis's initiative.
  • Legal and constitutional basis:
  • The Collection of Statistics Act 2008 gives the legal power to collect the data.

  • Statistics for Union matters fall under Union List Entry 94.

  • Latest results:

2022-23 2023-24
Rural MPCE Rs 3,773 Rs 4,122
Urban MPCE Rs 6,459 Rs 6,996
Urban-rural gap 71% 70%
Gini: rural / urban 0.266 / 0.314 0.237 / 0.284
  • Food share (2023-24): below half of spending. About 47% in rural areas and about 40% in urban areas. Beverages and processed food make up the largest food item.
  • Overall Gini: PIB material puts India's consumption Gini at 25.5 in 2022-23, down from 28.8 in 2011-12, on a 0-100 scale. The World Bank warns that consumption inequality in India may be underestimated.
  • The 2022-23 changes: the round changed the list of items, the sample design and the survey mode (CAPI). MoSPI itself says to keep this in mind when comparing it with older rounds. The World Bank says these changes "pose challenges for comparability".
  • One survey, three uses:
  • Poverty lines: the Lakdawala method used URP, Tendulkar used MRP, and Rangarajan used MMRP.
  • World Bank poverty estimates: the World Bank recalculated its whole series, 2011-12 included, on the MMRP basis. It then applied the same method to the 2023-24 round.
  • CPI weights: 2011-12 MMRP data gave the weights for CPI (base 2012). HCES 2023-24 feeds the new CPI (base 2024).

Don't confuse with

  • PFCE (Private Final Consumption Expenditure): this is the national-accounts estimate of household consumption, built from production-side data. HCES is a household survey, and its total comes out lower than PFCE.
  • PLFS (Periodic Labour Force Survey): also run by the NSO, but it measures jobs and unemployment (LFPR, WPR, UR), not spending.
  • Population Census: a complete count of every household, run by the RGI under MHA. HCES is a sample survey run by the NSO under MoSPI.
  • Multidimensional Poverty Index (MPI): a non-monetary measure of deprivation in health, education and living standards, based on NFHS data. HCES gives monetary (consumption-based) poverty.

Prelims Hooks

  • HCES is conducted by the NSO (MoSPI). It is not conducted by NITI Aayog, the RBI or the RGI.
  • Recall periods: URP is 30 days for all items. MRP is 365/30 days. MMRP is 7/30/365 days. Recorded MPCE is highest under MMRP.
  • MPCE (rural/urban): Rs 3,773 / Rs 6,459 in 2022-23, and Rs 4,122 / Rs 6,996 in 2023-24.
  • HCES 2022-23 used three questionnaires, three monthly visits and CAPI. It reports MPCE both with and without the value of free items such as PDS grain.
  • The last "thick" round before HCES was the 68th round (2011-12). The 2017-18 survey was withheld in November 2019.
  • Trap: "A larger sample removes the effect of recall period on MPCE." This is false. Recall bias is a non-sampling error.

Mains Points

  • Method shapes the headline number.
  • The 2022-23 changes (new item list, CAPI, counting free PDS grain) mean part of the measured fall in poverty may come from the new method rather than from real gains.
  • Applying the Rangarajan method to HCES 2022-23 gives 26.4% poverty. Pronob Sen said the Tendulkar line should not be applied to the new survey.

  • What should follow: India needs a new national poverty line fixed on HCES data.

  • Consumption inequality understates real inequality.

  • The rich save more and spend a smaller share of their income, so a consumption Gini is always lower than an income Gini.
  • Rich households also under-report or refuse to answer.

  • What should follow: linking survey data to income-tax data, or running a separate income survey, would capture the missing top end.

  • Data credibility is a governance issue (GS-II).

  • Withholding the 2017-18 survey left India without an official poverty estimate for about a decade.
  • CPI weights, welfare targeting and poverty debates all depend on HCES being released on time, using transparent methods and an independent process.

Recent developments

  • Feb 2026: the new CPI went live using HCES 2023-24 weights. The first release on the 2024=100 base covered January 2026 and showed provisional inflation of 2.75%. The 2012-base series ends with December 2025 data. This shows how the survey's spending patterns become the official inflation measure.
  • 2026: the new CPI basket gives less weight to food and more to services. It does this because HCES 2023-24 found that households now spend a smaller share of their budget on food. The new series also sorts spending into 12 divisions in place of the old 6 groups, following COICOP 2018 (the UN's standard list for grouping household spending by purpose). So a change in what households buy, as recorded by HCES, directly changes what "inflation" measures.
  • Oct 2026: CPI inflation reached 6.1%. This is the first time the new series crossed RBI's 6% upper limit, and clothing, housing, education and communication all hit series highs. Because the food weight from HCES is smaller, food prices alone could not have pushed the headline number this high, so non-food prices are rising too. HCES-based weights now affect how RBI reads inflation and how it sets policy.

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